Financial results

Interim Results
For the six months ended 31 December 2001

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Commentary | Income statements | Balance sheets | Statement of changes in equity | Cash flow statement


The group reported turnover of R533,2 million for the six months ended 31 December 2001, an improvement of 31% over the prior comparable reporting period (2000: R407,4 million). Trading profit increased 35% to R50,1 million (2000: R37,0 million), while headline earnings per share improved 33% to 191 cents (2000: 144 cents). The group remains ungeared, with the balance sheet reflecting cash reserves of R92 million.

A significant portion of turnover growth continues to be derived from established operations. Management believes that the ceramic tile market in South Africa is still evolving and offers potential in both the developed and undeveloped sectors of the market. Margins firmed during the period under review and cost control remains a continuous focus.

Italtile remains the leading global purchaser of ceramic tiles, which affords the group a competitive edge in securing the best products at the best prices. In its procurement activities, the company is consistently vigilant in its search for enhanced value in new products and markets.

African Operations

An ongoing programme of in-store enhancements and system improvements, complemented by improved product mix, contributed to sound results for our local operations.

The group’s strategy of holding quality stock to support forward sales proved prudent, given the sustained high demand for product over this reporting period.

CTM continues to be the brand of choice in the value-for-money segment of the market, evidenced by the division’s sound performance over the past six months.

In order to entrench its position as the fashion leader in the premium-end market, the Italtile division will continue to secure leading-edge product for the discerning customer. Management foresees significant potential in this market segment.

In the company’s preliminary profit announcement dated 14 August 2001, it was announced that the group had launched an empowerment vehicle, consisting of 50/50 partnerships between existing franchisees and black partners, aimed at increasing black ownership, while ensuring mentoring and skills transfer.

The group now trades out of 16 group-owned CTM stores, 44 franchised CTM stores, four empowered franchise CTM stores and 11 group-owned Italtile stores.

The group is currently represented in South Africa, Botswana, Namibia, Swaziland, Lesotho and Tanzania. Further expansion into Africa will be realised with the introduction of operations in Malawi and Zambia, scheduled for 2002. The group continues to actively explore opportunities in other sub-Saharan markets.

The group made further investments in its property portfolio, bringing the value to R199 million. This investment is in line with company philosophy that group-owned and franchised stores should operate out of company-owned premises. The highly visible store locations situated in prime positions serve to support group brands. CTM’s first Super-Store will be located in Fourways, Johannesburg, and is expected to be trading by mid-2002.

International Operations

The company has been trading in Australia for 30 months and has completed the first phase of penetration, namely creating and establishing brand presence, and consolidating operations. Set-up costs have been absorbed, and in line with management forecasts, the Australian operations reported a profit. Management is confident that profitability is sustainable and is positive about the growth potential of this market.

The group retains its nine CTM store presence across three states, Queensland, New South Wales and Victoria, having closed one poorly located store in Melbourne. The company does not anticipate opening any further stores during the current year, but is considering franchising certain of the operations in due course.


Italtile reported in its preliminary profit announcement that it would be enhancing its existing franchise model to incorporate a joint venture element. This arrangement aims to add value to the business while encouraging entrepreneurship. Negotiations have been finalised to convert existing group owned stores to this model, and by June 2002 it is anticipated that two CTM and three Italtile joint venture franchises will be operational.

The second phase of this programme will be implemented after July 2002 and will see further group owned stores converted to joint ventures. Having consolidated its position as a major franchisor, the company’s long term goal is to ensure that the bulk of the business vests in the hands of franchisees. This strategy is centred on the improved responsiveness with which franchises react to a changing market.

In addition to the proposed joint venture store expansion, further strong growth is projected from the empowered-franchise vehicle, with significant opportunities forecast in the short to medium term.

It is anticipated that the trading environment will remain challenging, aggravated by the unfavourable exchange rate. Management is satisfied that with continued focus on its core business, the group should deliver steady growth.

Accounting Policies

The accounting policies applied are consistent with those of the prior reporting period.


The Board has declared an interim dividend of 35 cents, an improvement of 21% (2000: 29 cents). The group will retain its cover at approximately five times.

Dividend Announcement

The directors have declared an interim dividend (number 71) of 35 cents per share to all shareholders. The last day to trade (“CUM” the dividend) in order to participate in the dividend will be Friday, 1 March 2002. The shares of Italtile Limited will commence trading “EX” dividend from the commencement of business on Monday, 4 March 2002 and the record date will be Friday, 8 March 2002. Payment will be made on or about Monday, 11 March 2002. Share certificates may not be dematerialised or rematerialised between Monday, 25 February 2002 and Friday, 8 March 2002, both days inclusive.

For and on behalf of the Board

G A M Ravazzotti
Executive Chairman


P D Swatton
Chief Financial Officer

14 February 2002

Registered Office: The Italtile Centre, cnr Peter Place and William Nicol Drive, Bryanston 2021
(PO Box 1689, Randburg 2125)

Transfer Secretaries: Computershare Services Limited, Edura, 41 Fox Street, Johannesburg 2001
(PO Box 61051, Marshalltown 2107)

Directors: G A M Ravazzotti (Executive Chairman), P D Swatton**, J Couzis*, G Cousins, D H Rabin, B G van Rooyen, S Galli (alternate) *Greek **British